Market Backdrop Improving – Buyers Will Be Back In A Few Weeks
Posted 9:30 AM ET – The market is treading water during the summer doldrums. We are in a news vacuum and stocks lack a catalyst. Traders and politicians are taking time off and I view this price action as “noise”. We will add to our position if the SPY pulls back to $280.
Trump is very close to signing a trade deal with Mexico and it could be finalized this month. Negotiations are taking place with Europe and the goal is zero tariffs. China will come back to the table in the next few weeks. These are all bullish developments, but there is nothing concrete for traders to latch onto.
Earnings season is winding down and retailers are posting big numbers. Walmart increased same-store sales by 4 1/2% and online sales were up 40%. Nordstrom announced last night and the results were excellent. The S&P 500 is trading at a forward P/E of 16 and valuations are attractive given current growth rates.
Economic data points have been excellent. Retail sales rose .5% and that was much better than the .1% that was expected. The unemployment rate is low and households are spending money.
Inflation is moderate and the Fed is using this opportunity to normalize rates. They have been artificially low for years and the Fed has an aggressive agenda.
Trump is going to “play nice in the sandbox”. He needs to get some deals on ahead of the November elections. You will put pressure on Republicans to pass an immigration bill, but a government shutdown is unlikely.
Swing traders have a half position of SPY and we will buy the other half at $280. I don’t believe the market will fall that low. We may have missed our opportunity to add by a mere $.16 this week. The action will be choppy the next few weeks and we will keep trying.
Day traders need to use the first hour range as a guide. If we are below the first hour low, short tech stocks. If we are above the first hour high, favor retail and healthcare. Support is at QQQ $178 and SPY $280. Traders should reduce their size and trade count. I have been focused on finding two or three good trades per day. Wednesday I did not trade until the last hour and that’s when I made my money.
Don’t read too much into the day-to-day price action. Take some time off if possible.
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